You’ve heard that Colorado doesn’t have enough money, but did you know that this year, we also have too much money? 

Right now, Colorado is running a budget deficit and a budget surplus at the same time. That means legislators are cutting free lunches for kids, Medicaid provider rates, and dental services for low-income patients, while also preparing to send refund checks to taxpayers. The reason for this paradox lies in the Taxpayer’s Bill of Rights, or TABOR. TABOR says that state revenue cannot grow faster than the rate of inflation plus population growth without voter approval. Any revenue collected above this limit, known as the “TABOR surplus,” must be refunded to taxpayers unless voters approve retaining it. 

But here’s the problem: the TABOR cap doesn’t grow fast enough to keep up with the real-world costs of running the state. Inflation and caseload growth for things like K-12 education, higher education, and healthcare grow faster than the cap allows. So even in years when Colorado brings in plenty of revenue, we’re forced to cut services and send refunds at the same time.

So, let’s dive deeper into how this happens and, more importantly, why it hurts Colorado’s future.

Balancing the Budget (and Breaking it)

Colorado has to balance its budget every year – that means the money coming in (revenue) must equal the money going out (spending). When we talk about a budget deficit here, it doesn’t mean the state is taking on debt; Colorado isn’t allowed to run a deficit like the federal government can. Instead, it means we have a structural deficit: our revenue doesn’t keep pace with the rising costs and growing needs. Every year, we underfund and cut services because we can’t retain enough revenue. 

Think of it this way: 

A structural deficit happens when the state’s spending needs rise faster than TABOR allows our revenue to grow. At the same time, we can experience a TABOR surplus, which happens when revenue exceeds the arbitrary cap, even if critical services are underfunded.

In recent years, Colorado experienced this very scenario. For instance, in the fiscal year 2023-24, the state collected $1.7 billion more than the TABOR limit, while also facing a $314 million budget shortfall. In fiscal year 2025-26, the state had a $108 million TABOR surplus and a $1.2 billion deficit. 

In both cases, even with ample revenue, constitutional constraints like TABOR meant we couldn’t invest in education, healthcare, transportation, or other essentials. And worse, we couldn’t save the massive surplus in 2023-24 to cushion the downfall that followed. TL;DR: We can’t invest in good times. We can’t save in good times. And the bad times hit hard. 

The consequences are real: cuts made in the 2025-26 budget include major reductions to transportation infrastructure and maintenance updates, free meals for kids starting next year, local food pantries, dental care for low-income adults, and the Medicaid provider rate. 

TABOR Cap Doesn’t Keep Up

So, how did we get here? What is a “TABOR-imposed cap”? And how is the cap even calculated? 

The TABOR cap is an arbitrary self-imposed restriction that limits how much revenue Colorado can keep each year. The cap grows based on a formula: inflation plus population growth. For example, in 2025, our inflation calculation was 2.3%, and our population grew by 1.4%, resulting in a total capped growth of 3.7%. 

But here’s the kicker: the inflation measure used for the TABOR cap is deeply flawed. Instead of tracking the rising costs of what the government actually needs to buy, like healthcare and education, it is based on consumer inflation, which measures everyday costs like groceries, gas, and rent. From a measurement standpoint, this is known as “low validity,” meaning it doesn’t accurately measure what it’s intended to, leading to a growing gap between what communities need and what the state can afford.

And this mismatch has real consequences. Over the last 30 years, consumer inflation has grown significantly slower than the cost of providing education and healthcare, two of the state’s biggest expenses. For example, spending for Medicaid and the Child Health Plan Plus (CHP+) needed to increase by 6% to 7% each year to keep up with caseload growth and inflation. School spending needed to grow by $180 million, but only increased by $100 million. As a result, we’re effectively spending less on healthcare and education than what’s needed just to maintain current service levels.

Why Healthcare and Education Costs Grow Faster

So, why have education and healthcare costs outpaced consumer inflation? 

The answer lies in the types of services provided through our education and healthcare dollars, as well as the improvement of technology and quality that students, patients, and their families rely on. High-quality healthcare and personalized education are more labor-intensive, and the technology used in classrooms and doctors’ offices today is much more advanced (and expensive) than it was in 1993. Maintaining quality services means higher costs year after year.

At the same time, the population growth measure that TABOR’s cap uses also falls short. Certain groups in Colorado, such as older adults and school-aged children, require more public services. Those populations have grown faster than the general population and are projected to continue growing rapidly.

In short, Colorado’s needs are rising faster than the TABOR cap allows our budget to grow. 

How TABOR Refunds Are Distributed 

So what happens when we’re forced to refund money rather than invest in our growing needs? 

If you’re a median earner making around $50,000 in Colorado, your TABOR surplus refund this year gets you about $47. 

The surplus is distributed through a system called the Six-Tier Sales Tax Refund, which gives money back according to income, so the more you make, the bigger your TABOR refund check. 

This hasn’t always been the case. In 2022 and 2023, the legislature temporarily made refunds equal for everyone. However, these identical checks raised legal concerns with the federal government and weren’t made permanent. So now, we’re back to the old system: the more you make, the bigger your check. 

Devastating Cuts, Disappointing Refunds

With identical refunds gone and chronic underfunding still in place, Coloradans are left with the worst of both worlds–deep cuts to essential services and refund checks too small to offset the real damage. 

Voters deserve the programs they passed, like universal school meals, to be implemented. Our rural communities deserve well-paved roads. Our kids deserve a fully-funded K-12 education. To give Colorado the future it deserves, we need to confront the limitations of TABOR head-on and have an honest conversation about what kind of state we want to be.